monopolist sells boat insurance policies linked to their registrations in two states, and resales between the two states is not allowed, as the registrations are in line with the rules set in each state. The demand curves for car insurance policies in the two states are: P1 = 200 – Q1 P2 = 150 – Q2 The monopoly's marginal
A monopolist sells boat insurance policies linked to their registrations in two states, and resales between the two states is not allowed, as the registrations are in line with the rules set in each state. The demand
P1 = 200 – Q1
P2 = 150 – Q2
The
a. Find the
b. How would change the outcome if the monopolist’s marginal cost increases from $50 to
$70 only in the first state for the company being able to discriminate prices between states?
c. What would be the outcome if the government applies a tax of $30 per insurance (unit) to
the latest scenario presented in b)?
d. Present a graphical representation of this case study and discuss about the profit
maximising output under the different scenarios presented above. Does the government
have other alternatives to intervene this market?
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